The preparation of financial information and its audit, therefore, needs to be regulated through law with stringent penalties for non-observance. Accounting And Auditing is a technical matter which needs to be gone into by experts keeping in view the requirements of proper disclosures of financial transaction in the interests of healthy corporate governance.
Institutional mechanism for developing Accounting Standards
The present statute provides for a mechanism for development of Accounting Standards. We understand that Accounting Standards for the use of Indian corporate sector, taking into account International Accounting Standards, are being developed through the instrumentality of the National Advisory Committee on Accounting Standards (NACAS). This is an important aspect that needs to be pursued. In the meantime, the Institute of Chartered Accountants of India (ICAI) has done useful work in prescribing operational standards of accounting to fill the gap till Accounting Standards could be notified. We expect that the process of notification of Accounting Standards, incorporating international best practices, would be completed shortly.
Is an audit mandatory for a startup private limited company?
Yes, it is mandatory for private a private limited company. In India regardless of the type of business, there are certain conditions which companies should follow. A company audit is examination or inspection of various books of accounts, documents, and vouchers of an organization to ascertain by an auditor to followed by physical checking of inventory to check companies are following the documented system of transaction.
The auditor will assess the records and produce Audit reports and Audited fiscal reports which they will document with the Registrar of Companies.
We have explained beneath a portion of the regular compliances which a private limited company needs to compulsorily follow:
- Appointment of Auditor: Auditor will be assigned for five years and form ADT-1 will be filed. The initial Auditor will be named within one month from the date of incorporation of the company.
- Statutory Audit of Accounts: Every corporation will arrange its Accounts and get the equivalent reviewed by a Chartered Accountant toward the end of the fiscal year compulsorily. The auditor will give an audit report and the assessed financial statements to document it with the Registrar.
- Filing of Annual Return (Form MGT-7): All private limited companies are compulsorily required to document their annual return within 60 days of organising of the annual general meeting (AGM). Yearly Return will be for the period from 1st of April to 31st March.
- Documenting of Financial Statements (Form AOC-4): The organization must record its balance sheet alongside declaration of profit and loss account and director report in this form within 30 days of conducting the AGM.
- Organising Annual General Meeting: Each private limited company must organise an AGM in each scheduled year. Organizations are required to hold their AGM within six months before the financial year ends.
- Arranging Directors’ Report: Directors’ Report will be set up with a notice of all the data required under Section 134.
Is it mandatory to audit my private limited company with zero transactions?
Yes. You need to complete annual filing as well and also preferable to complete ITR filing of the company. Statutory audit would be compulsory but not Tax audit.
Annual RoC Filings
It is obligatory for Private Limited Companies to file annual accounts and returns with details of the executives, shareholders and so on to the Registrar of companies. Such compliances are necessary to be made once a year. As a part of the annual filing, the accompanying forms are to be documented alongside the ROC:
- Form MGT-7 (Annual Return): All private limited companies must compulsorily file their annual returns within 60 days of having Annual General Meeting. Yearly Return will be for the time frame 1st April to 31st March.
- Form AOC-4 (Financial Statements): All private limited companies must compulsorily provide details of the Profit and Loss Account and Director Report in AOC-4 form within 30 days of having Annual General Meeting.
A Director’s report is a financial document that needs to be filed before the financial year ends. All directors need to reveal details of their position as Director in different organizations. And all other details must be submitted in hard copy in a precise Director’s Report.
Income Tax Compliances for company
- Computation and quarterly payment of advance tax
- Documenting income tax returns (corporate Tax has to be paid at a rate of 22% in addition to Cess for existing company and 15% for a new company)
- Tax Audit – Compulsory if business, turnover or gross revenue of a business surpasses 1 crore rupees in the earlier year applicable to the evaluation year.
- Tax audit report filing